Having a sound financial plan is the most crucial element in a startup. It is the first thing investors will ask an entrepreneur. Setting up projections for your startup is an ideal way to start your financial plan. It is essential in a start-up to restrain risks and to analyze the extent of financial requirements. There might be uncertainties and potential threats as a startup, so your financial plan will assist the investors and business partners.
The most important aspect is that it would be of help in complying with legal accountability. The following points will help you build a strong financial plan for your startup.
Create a revenue projection: Before you begin with the regular revenue activities and sales, it is crucial for you to set up a revenue projection. Ensure that you consider the fact that your business has just started, therefore identify the requirements and give a rational growth scale for the initial phase of your business. Do not add extra costs since it will weaken the credibility factor of your business in the eyes of your investors. A sound plan with proper business insights will portray you as a responsible entrepreneur.
Create a separate bank account for your startup: Your business must be doing great and your customers might be satisfied with your service. But there might be instances where you mix up your personal and work accounts. To complicate the situation further, you might mix the receipts for both. Therefore it is obligatory to get your finances in place in order to efficiently run your business.
Open an account for your business in a local branch of your preferred bank. Begin with depositing the revenue in your account and pay all of your business expenses from this account. In case you pay for your personal needs, make note of it and make the payment while submitting your expense and business reports.
This will help in making you financially disciplined. But if you have just started your business and there is no income yet, begin with funding your business account. This will help you in determining how much you need to set aside for your business expenses.
Build a financial plan for one year: Formulate a one year plan established on your requirements in terms of human resources, the infrastructure for your office- deciding whether you will buy or rent – operational costs, costs for product development and innovation and so on.
Acquire a business credit card: Just having a bank account is not adequate these days. There might be a sudden need to buy some things for your business online and you will need a credit card to finish the process. It is a must to have separate finances for your personal and work requirements because it makes the process of tracking your business expenses easier.
Get yourself an accounting system: The most important task for a startup is to get an accounting system to help you manage your business. Once you integrate your bank account into the accounting system along with your credit card it will make your work easier in terms of speed, automatic document production, and availability of information. It will also be cost-effective.